Hello trader,

It was another week when J-Pow-Pow (my nickname for the Federal Reserve Chairman, Jerome Powell) moved the market by blowing smoke during this Wednesday’s Fed policy announcement and press conference. 

J-Pow-Pow, who many call the “great and powerful Oz” for his power to manipulate markets, has come under increased attack of late, with some heads of Wall Street’s largest banks, who rarely speak ill of the Fed, starting to claim the Fed does not have what it takes to stop inflation because it has become too political. 

But, hey! 

We’re traders, and we need to keep on keepin on, no matter what the powers that be decide.

That means we have to find setups we like, and maybe even some stocks we like simply because they have strong businesses. 

I have a list of companies that I like to trade because they’re well-run and respected by Wall Street.

No, I’m not kowtowing to the big boys. But, I do know that stocks that are not in with the “in” crowd do trade with an extra layer of vulnerability.

Heck, we respect this philosophy so much that we spend thousands of dollars on scanners like Dollar Ace to help find where the “smart money” is flowing.

Anyway, these are the stocks I tend to gravitate to when market conditions are uncertain, as they have been of late.

In the past, I’ve made some nice trades in the stock I am going to share with you today, and I am close to pulling the trigger on it again.

Now that this past Wednesday’s Fed announcement has helped to derail the market’s attempt to rally off of Monday’s strong “hammer” candlestick reversal day, we need to be careful as the market continues to search for levels that were, quite simply, buying pressure begins to overtake selling pressure. 

As this process unfolds, I’m waiting patiently and keeping an eye on a small handful of stocks that I want to trade.

One of the companies I’ve traded in the past with good success is Big 5 Sporting Goods (BGFV).

According to Finviz, Big 5 Sporting Goods Corporation operates as a sporting goods retailer in the western United States. The company’s products include athletic shoes, apparel, and accessories, as well as a selection of outdoor and athletic equipment for team sports, fitness, camping, hunting, fishing, tennis, golf, and winter and summer recreation, as well as home recreation. It also provides private-label items, such as shoes, apparel, camping equipment, fishing supplies, and snow sports equipment. 

The company sells private label merchandise under its own trademarks comprising Golden Bear, Harsh, Pacifica, and Rugged Exposure. As of January 3, 2021, it operated 430 stores. The company also operates an e-commerce platform under the Big 5 Sporting Goods name. Big 5 Sporting Goods Corporation was founded in 1955 and is headquartered in El Segundo, California.

Why do I like it?

First and foremost, it’s a good company.

Although we talk a lot about technical trading on a daily basis, you want to get into the habit of putting your money into good companies to lend to the conviction of your trade.

This stock traded inside a range for much of this past week.

What I really like about the stock’s recent action, though, is that support is coming from some heavy-hitting sources.

For instance, this first chart shows BGFV has been finding buyers at a confluence of support levels in form of the massive 05/04/21 to 05/05/21 gap and anchored VWAP from the stock’s all-time, COVID crisis lows from March 2020. 

Figure 1

As an added bonus, the RSI indicator has slowly been improving off of oversold levels of late and is starting to show signs of stability above the 40 level.

Now, I’ve noted in the past that the RSI’s 40 level is important because it represents the low-end of this indicator’s bullish regime range.

Therefore, this could be an indication that the stock’s long-term trend strength is slowly starting to transition positively. 

Figure 2

If the bulls can break above the $19.93 resistance level, I feel that a run higher back towards $25 is in the cards.

Given how important the above-mentioned support levels are from $17.50 to $16.88, it’s hard to envision anything less than an all-out market breakdown causing this stock to close lower than support.